Cantwell Introduces Bill to Crack Down on Coal Companies’ Risky Business Practices

The Coal Cleanup Taxpayer Protection Act

June 16, 2016

Washington, D.C. – Today, Ranking Member of the Senate Energy and Natural Resources Committee U.S. Senator Maria Cantwell (D-Wash.) introduced the Coal Cleanup Taxpayer Protection Act. The bill would protect taxpayers from liabilities caused by coal companies’ risky financial practices.

Current law requires coal companies to ensure that they can cover the cost of reclamation – that is, rehabilitating land after coal mining operations on it have stopped. But the law allows the Interior Department and state agencies to accept performance bonds for this cleanup work from coal mining companies without separate surety, known as “self-bonds.” These self-bonds are a significant financial liability to state and federal taxpayers. As dozens of coal companies have declared bankruptcy in the past two years, the financial risk to taxpayers posed by self-bonding has become apparent.

We need to make sure the taxpayer isn’t on the hook for cleanup work by bankrupt coal companies anymore. Self-bonding clearly isn’t working, and we need to stop this dicey practice from continuing,” Sen. Cantwell said.

Current law, however, does not require the acceptance of these bonds. In fact, some states do not allow their use, including Kansas, Kentucky, Maryland, Montana and Virginia.

Several states have come to their senses about the risks of this practice, so the federal government should be next. We’ve already taken the step to abandon self-bonding for hardrock mining, so coal mining is a natural next step,” Sen. Cantwell said.

Sen. Cantwell’s bill would prohibit any new self-bonds for coal reclamation. The bill would also phase out existing self-bonds when their 5-year operating permits come up for renewal under current law.

“We applaud Sen. Cantwell's leadership in crafting this bill to end the flagrantly irresponsible practice of self-bonding, which essentially uses working families and honest taxpayers as financial backstops for risky business decisions by coal executives. In the wake of numerous bankruptcies, coal companies must be held accountable for cleaning up the lands that they have destroyed. These companies shouldn't be allowed to walk away because of a deeply flawed system that can leave taxpayers holding the bag,” said Michael Brune, executive director of the Sierra Club.

“Since our founding, our organization has advocated for strong reclamation standards and bond requirements at coal mines. Unfortunately, Wyoming mines are some of the largest users of self-bonds, which have become nothing more than unfulfilled promises with company bankruptcies. With over $2 billion in outstanding reclamation liability in Wyoming, this is important legislation to close the self-bonding loophole and minimize financial risks to taxpayers,” said Clearmont, Wyo., Powder River Basin Resource Council Chair and Western Organization of Resource Councils Board Member Bob LeResche.

“We applaud Sen. Cantwell for her leadership in closing a legal loophole that has allowed mining companies to shirk their responsibility to clean up after themselves,” said Mary Ellen Kustin, director of policy for the Public Lands Project at the Center for American Progress. “The health of our water and environment should not be left to the chance of bankruptcy.”  

“Large coal companies want to stick taxpayers with the bill for massive reclamation costs. Some of the country’s largest coal companies, including Arch, Peabody and Alpha, are trying to use bankruptcy courts to shift the cost of cleaning up old mines onto taxpayers—a tab that could run into the hundreds of millions of dollars. We applaud Sen. Cantwell for taking steps to protect taxpayers and end the faulty process of self-bonding,” said Ryan Alexander, president of Taxpayers for Common Sense.

To protect taxpayers from footing the bill for coal companies, Sen. Cantwell’s bill sets a financial liability standard for alternative bonding programs. The provision limits the Interior Department’s ability to approve alternative state programs to those that “result no greater risk of financial liability” to the government than a standard surety or corporate bond program.

Sen. Cantwell’s bill also requires the Interior Department to issue a rule within a year of enactment to minimize the financial liability of the government by tightening requirements for sureties.

Lastly, the bill adjusts rules for posting collateral by prohibiting coal companies from posting coal assets (including coal, mines and processing facilities) as collateral. The bill also authorizes the Interior Department to require the inclusion of coal executives’ salaries and bonuses as collateral.

“Ending self-bonding is critical to protecting the American public from the fallout of the coal industry’s financial crisis,” said Clark Williams-Derry, director of energy finance for the Seattle-based Sightline Institute. “We applaud Sen. Cantwell’s efforts to ensure that citizens and communities won’t be saddled with billions of dollars for coal mine cleanup as the nation transitions away from coal and towards cleaner energy.”

Sens. Dick Durbin (D-Ill.), Sheldon Whitehouse (D-R.I.) and Martin Heinrich (D-N.M.) have joined the bill as original co-sponsors, and Rep. Matt Cartwright (D-Pa.-17) is introducing a companion bill in the U.S. House of Representatives.

“Right now, mining companies can avoid paying the full cost of cleaning up the public health and environmental hazards they create by filing for bankruptcy,” said Sen. Whitehouse. “This legislation would ensure coal companies have assets available to pay for cleaning up their messes so taxpayers aren’t stuck with the bill.”

“Taxpayers should not have to bear the burden of coal mining companies’ irresponsible financial practices,” said Sen. Durbin. “These measures strengthen bond requirements to successfully hold the industry accountable for reclamation.”   

“Illinois and Indiana taxpayers should not be left holding the bag for bankrupt Peabody Energy’s $253 million in self-bonded mine reclamation and environmental cleanup responsibility costs,” said Howard Learner, executive director of the Environmental Law & Policy Center. “We commend Sens. Cantwell and Durbin for acting on the lessons learned and moving to end the failed self-bonding approach in order to better protect American taxpayers and our environment.”

Sen. Cantwell has made coal issues a cornerstone of her legislative platform as ranking member of the committee. Since becoming ranking member last year, she has made multiple calls to reform the federal coal program and to end the practice of self-bonding. Most recently, she questioned Secretary Jewell in February on the dangers of self-bonding. Along with Sen. Durbin, Sen. Cantwell also has requested an investigation by the Government Accountability Office (GAO) into the risk to the taxpayer of self-bonding.

Read the bill text and the summary.
Read more on the GAO investigation request on self-bonding.
Read Sen. Cantwell’s exchange with Sec. Jewell on self-bonding.
Find all of Sen. Cantwell’s work on coal here.